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FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-9068
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WEYCO GROUP, INC.
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0702200
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
234 East Reservoir Avenue
P. O. Box 1188
Milwaukee, Wisconsin 53201
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(Address of principal executive offices)
(Zip Code)
(414) 263-8800
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of October 28, 1996 the following shares were outstanding.
Common Stock, $1.00 par value 1,258,253 Shares
Class B Common Stock, $1.00 par value 329,722 Shares
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report on Form 10-K.
WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
September 30 December 31
1996 1995
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CURRENT ASSETS:
Cash and cash equivalents $ 2,407,829 $11,247,137
Marketable securities 8,092,420 12,677,712
Accounts receivable, net 24,645,392 18,867,506
Inventories -
Finished shoes 11,271,092 14,188,733
Shoes in process 765,410 618,671
Raw materials and supplies 354,503 138,303
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Total inventories 12,391,005 14,945,707
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Deferred income tax benefits 1,456,000 1,746,000
Prepaids and other current assets 31,382 10,211
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Total current assets 49,024,028 59,494,273
MARKETABLE SECURITIES 15,544,657 10,470,262
DEFERRED INCOME TAX BENEFIT 668,000 519,000
OTHER ASSETS 5,660,622 5,331,314
PLANT AND EQUIPMENT 8,657,631 8,782,806
Less - Accumulated depreciation (5,761,077) (5,269,369)
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2,896,554 3,513,437
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$73,793,861 $79,328,286
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LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 7,766,282 $ 9,181,933
Dividend payable 350,455 397,113
Deferred compensation 1,847,067 1,175,000
Accrued liabilities 6,338,484 2,743,479
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Total current liabilities 16,302,288 13,497,525
DEFERRED COMPENSATION -- 1,747,764
SHAREHOLDERS' INVESTMENT:
Common stock 1,587,975 1,884,015
Other shareholders' investment 55,903,598 62,198,982
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$73,793,861 $79,328,286
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Three Months ended September 30 Nine Months ended September 30
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1996 1995 1996 1995
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NET SALES $34,864,730 $33,124,343 $100,172,450 $91,209,220
COST OF SALES 25,267,625 23,798,309 73,599,206 66,049,886
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Gross earnings 9,597,105 9,326,034 26,573,244 25,159,334
SELLING AND ADMINISTRATIVE EXPENSES 5,576,213 6,149,851 17,683,124 18,176,527
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Earnings from operations 4,020,892 3,176,183 8,890,120 6,982,807
INTEREST AND OTHER INCOME, NET 275,138 712,084 802,038 1,397,455
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Earnings before provision for
income taxes 4,296,030 3,888,267 9,692,158 8,380,262
PROVISION FOR INCOME TAXES 1,620,000 1,481,000 3,620,000 3,100,000
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Net earnings $ 2,676,030 $ 2,407,267 $ 6,072,158 $ 5,280,262
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WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
(Note 2) 1,594,225 1,869,627 1,634,235 1,879,404
PER SHARE (Note 2):
Net earnings $1.67 $1.29 $3.72 $2.81
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Cash dividends $.22 $.21 $.64 $.62
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 6,091,531 $ 1,252,310
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (11,561,000) (29,576,616)
Proceeds from sales of marketable securities 11,071,897 29,462,922
Purchase of plant and equipment (232,917) (92,011)
Other (323,579) (251,096)
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Net cash used for investing activities (1,045,599) (456,801)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred compensation payments (1,175,000) --
Cash dividends paid (1,092,234) (1,153,005)
Shares purchased and retired (11,632,506) (1,368,255)
Proceeds from stock options exercised 14,500 337,000
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Net cash used for financing activities (13,885,240) (2,184,260)
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Net decrease in cash and
cash equivalents (8,839,308) (1,388,751)
CASH AND CASH EQUIVALENTS at beginning
of period 11,247,137 3,648,361
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CASH AND CASH EQUIVALENTS at end
of period $ 2,407,829 $ 2,259,610
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 2,545,780 $ 2,827,025
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NOTES:
(1) In the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial information
have been made. The results of operations for the three months or nine
months ended September 30, 1996, are not necessarily indicative of results
for the full year.
(2) Earnings per share are computed based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares consist of stock options which have a dilutive effect when applying
the treasury stock method and are considered when material.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity
The Company's primary source of liquidity is its cash and marketable
securities which aggregated approximately $26,045,000 at September 30,
1996, compared with $34,395,000 at December 31, 1995. In addition, the
Company maintains a $7,500,000 bank line of credit and has banker
acceptance loan facilities to provide funds on a short-term basis when
necessary. The Company did not make any borrowings under these facilities
during the first nine months of 1996. On January 3, 1996, the Company paid
$9,938,885 for the purchase of 146,860 shares of Common Stock and 106,360
shares of Class B Common Stock. On February 1, 1996, the Company paid
$1,175,000 under deferred compensation agreements.
The Company has historically generated adequate cash flow from operations
to meet working capital requirements. The Company believes that
available cash and marketable securities, cash provided from operations and
available borrowing facilities will provide adequate support for the cash
needs of the business.
Results of Operations
Total net sales increased $1,740,000 (5%) for the three months ended
September 30, 1996 compared with the same period in 1995. Net sales
in the wholesale division increased $3,044,000 (10%) from $29,840,000 in
1995 to $32,884,000 in 1996. The increase in sales resulted from an
increase of 6% in the number of pairs of shoes shipped as compared with
1995, as well as an increase in the average selling price per pair,
attributed to a change in product mix.
Retail net sales decreased 40% from $3,284,000 in the third quarter of
1995 to $1,980,000 in the third quarter of 1996. The decrease resulted
primarily from the closing of 10 retail units during 1995 and the
termination of a lease agreement covering 14 department stores in July,
1996.
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For the nine months ended September 30, 1996, net sales increased
$8,963,000 (10%) as compared with the same period in 1995. Wholesale sales
increased $11,594,000 or 14% from $80,201,000 in 1995 to $91,795,000 in
1996. This increase resulted from an increase of 9% in the number of pairs
shipped compared with 1995, as well as an increase in the average selling
price per pair, attributed to a change in product mix.
Retail net sales decreased $2,631,000 (24%) from $11,008,000 in 1995 to
$8,377,000 in 1996, as a result of the previously discussed store closings.
Same store net sales were flat as compared with the same period in 1995.
Gross earnings as a percent of net sales for the third quarter and the
nine months ended September 30 were consistent between 1995 and 1996 at
approximately 27%. Gross earnings in 1996 included a $600,000 charge in
the first quarter for the closing of retail units.
Selling and administrative expenses for the third quarter and nine
months ended September 30, were consistent between 1995 and 1996 after
considering decreases in these expenses related to the closing of retail
units, partially offset by increases due to increased wholesale volume in
1996.
Interest and other income is comprised principally of municipal bond
interest, however, in the third quarter of 1995, it also included $345,000
of income from a lease assignment. Year-to-date municipal bond interest
has decreased in 1996 due to a lower amount of marketable securities.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEYCO GROUP, INC.
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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